ADMS 3530 Lecture Notes - Cash Flow, Tax Shield, Net Present Value

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ivorymouse990

8 May 2012

School

York University

Department

Administrative Studies

Course

ADMS 3530

Professor

Lois King

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Document Summary

Average cost = . 75 million / 1 million = . 75/burger. Average cost = . 25 million / 2 million = . 125/burger. The fixed costs are spread across more burgers thus the average cost falls: at the break-even level of sales, which is 60,000 units, profit would be zero, a. Accounting break-even would increase because the depreciation charge will be higher. Solve to find that variable cost per unit = . 50. If cf = 0 for the entire life of the project, then the pv of cash flows = 0, and project npv will be negative in the amount of the required investment. 500 (80% of sales) (includes depreciation on new checkout equipment) $ 920: cash flow increases by ,000 from ,000 (see table 8. 1) to ,000. = 600 + 140 7. 536 = . 04 thousand = ,040. Npv = 600 + 140 annuity factor (8%, 12 years) The equipment reduces variable costs from 81. 25% of sales to 80% of sales.

Related Questions

In a slow year, Deutsche Burgers will produce 1 million hamburgers at a total cost of $4.5 million. In a good year, it can produce 2 million hamburgers at a total cost of $5.0 million.

a.	What is the average cost per burger when the firm produces 0.5 million hamburgers? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Average cost

$ per burger

b.	What is average cost when the firm produces 1 million hamburgers? (Round your answer to 2 decimal places.)

Average cost

$ per burger

Why is average cost lower when more burgers are produced?

	Fixed costs are constant per burger.
	Variable costs are lower per burger.
	The fixed costs are spread across more burgers.
	The fixed costs are spread across less burgers.

burgundylizard182

In a slow year, Deutsche Burgers will produce 3.4 million hamburgers at a total cost of $5.1 million. In a good year, it can produce 5.1 million hamburgers at a total cost of $5.7 million.

a.	What are the fixed costs of hamburger production? (Do not round intermediate calculations. Enter your answer in millions rounded to 1 decimal place.)

Fixed cost

$ million

b.	What is the variable cost per hamburger? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Variable cost

$ per burger

c.	What is the average cost per burger when the firm produces 2 million hamburgers? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Average cost

$ per burger

d.	What is the average cost per burger when the firm produces 3 million hamburgers? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Average cost

$ per burger

Why is the average cost lower when more burgers are produced?

	The fixed costs are spread across more burgers.
	Fixed costs are constant per burger.
	Variable costs are lower per burger.

violetyak849

In a slow year, Deutsche Burgers will produce 3.5 million hamburgers at a total cost of $5.3 million. In a good year, it can produce 5.5 million hamburgers at a total cost of $6.2 million.

a.	What are the fixed costs of hamburger production? (Do not round intermediate calculations. Enter your answer in millions rounded to 1 decimal place.)

Fixed cost

$ million

b.	What is the variable cost per hamburger? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Variable cost

$ per burger

c.	What is the average cost per burger when the firm produces 3 million hamburgers? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Average cost

$ per burger

d.	What is the average cost per burger when the firm produces 4 million hamburgers? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Average cost

$ per burger

marooncat177

ADMS 3530 Lecture Notes - Cash Flow, Tax Shield, Net Present Value

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